Dana Petroleum formally rejected a £1.7bn takeover approach from Korea National Oil Corporation (KNOC) yesterday in a spat over the value of the company and the mechanism for taking discussions forward.

"The Dana board does not consider it is prudent or warranted to provide a recommendation to any conditional, unsolicited proposal at this level," the company said. "In addition, the Dana Board believes KNOC has failed to recognise the value of the company's recent developments and work in progress."

Price was not the only issue to scupper a deal which has drawn vocal support from Schroders, Dana's largest shareholder, despite the reluctance of the board.

Dana maintains that KNOC's refusal to sign a non-disclosure agreement (NDA) necessary for it to conduct due diligence left "no way of progressing" the talks. Not only will KNOC not sign the NDA, it is also refusing to conduct due diligence without the Dana board's recommendation of its offer, the company said.

KNOC responded with "disappointment", claiming its offer had been based on "very detailed analysis" and that it would only be "appropriate" to enter into an NDA "in the context of an agreed offer price". The group is now "considering its options".

Dana's stock fell more than 10 per cent on news of the collapse of the deal, although the price recovered in later trading to close down 3.6 per cent at 1,632p.

Dana chief executive Tom Cross stood to make £33m from his 2 per cent stake if the sale went ahead.